In the latest move to do away with its non-core operations and
HSBC Holdings plc
) announced last week that it is planning to divest two of its U.S.
insurance businesses to Bermuda-based
Enstar Group Limited
) for $181 million in cash. Household Insurance Group Holding
Company, an affiliate of HSBC, will be divesting Household Life
Insurance Company and HSBC Insurance Company.
Both firms, which are to be divested, write life insurance and
related products that comprise credit insurance, term life
insurance, assumed reinsurance, corporate owned life insurance and
annuities for the U.S. and Canadian clients. HSBC had acquired
Household International Inc. in 2003 and integrated the latter with
its subsidiary Household Finance Corporation.
The deal is still subject to regulatory approvals as well as other
customary closing conditions. HSBC stated that the transaction is
expected to be closed by early next year.
The deal is a part of HSBC's long-term strategy to revamp its
operations in order to stabilize the capital levels and improve
efficiency. In May 2011, the CEO of the company had announced plans
to reduce the operating expenses by $3.5 million by the end of
2013, through restructuring and contraction of its global business.
Further, in August 2011, HSBC also announced its plans to trim down
the workforce by 30,000 in the next two years.
With the main intention of focusing more on the fast-growing and
profitable markets, HSBC has made significant progress in shedding
its unprofitable and non-core operations by divesting or closing
more than 35 of its operations across the globe. The major
divestitures include the sale of 195 non-strategic branches in the
First Niagara Financial Group Inc.
) and its U.S. credit card business to
Capital One Financial Corporation
Moreover, earlier this year, HSBC announced the sale of its general
insurance businesses in Asia and Latin America for $914 million.
The company will be divesting its general insurance units in Hong
Kong, Singapore, Argentina and Mexico to Australia's QBE Insurance
Group Ltd. and France-based AXA Group in two separate deals.
Currently, HSBC retains a Zacks #4 Rank, which translates into a
short-term Sell rating. However, considering the fundamentals, we
maintain a long term Neutral recommendation on the stock.
CAPITAL ONE FIN (COF): Free Stock Analysis
ENSTAR GROUP LT (ESGR): Free Stock Analysis
FIRST NIAGARA (FNFG): Free Stock Analysis
HSBC HOLDINGS (HBC): Free Stock Analysis Report
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